The Owner of Chips Etc

question 72

Multiple Choice

The owner of Chips etc. produces two kinds of chips: lime (L) and vinegar (V) . He has a limited amount of the three ingredients used to produce these chips available for his next production run: 4800 ounces of salt, 9600 ounces of flour, and 2000 ounces of herbs. A bag of lime chips requires 2 ounces of salt, 6 ounces of flour, and 1 ounce of herbs to produce; while a bag of vinegar chips requires 3 ounces of salt, 8 ounces of flour, and 2 ounces of herbs. Profits for a bag of lime chips are $0.40, and for a bag of vinegar chips $0.50.
-What is the constraint for salt?

• A) 6L + 8V ≤ 4800
• B) 1L + 2V ≤ 4800
• C) 3L + 2V ≤ 4800
• D) 2L + 3V ≤ 4800

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Definitions:

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which is used to finance its overall operations and growth.

Coupon Rate

The annual interest rate paid by a bond's issuer to its bondholders, expressed as a percentage of the bond's face value.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity which constitutes how a company finances its overall operations and growth.

Indifference EBIT

Indifference EBIT (Earnings Before Interest and Taxes) is the level of EBIT where a company is indifferent between different financial options or structures, as each would result in the same earnings.